COMPANY |
Rocket Companies, Inc. |
COURT |
United States District Court for the Eastern District of Michigan |
CASE NUMBER |
21-cv-11528 |
JUDGE |
The Honorable Thomas L. Ludington |
CLASS PERIOD |
February 25, 2021 through May 5, 2021 |
SECURITY TYPE |
Common Stock (A) |
Case Background:
The Class Period commences on February 25, 2021, when Rocket issued a press release titled, in part, “Rocket Companies Experiences Explosive Growth,” which announced Rocket’s financial results for the fourth quarter and full year of 2020. Rocket reported, among other things, closed loan origination volume of $107.2 billion and gain on sale margin of 4.41% for the fourth quarter. Rocket emphasized that it had “[i]ncreased gain on sale margin by 100 basis points year-over-year” during the quarter and “[i]ncreased gain on sale margin by 127 basis points year-over-year to 4.46%” for the full-year period. Throughout the Class Period, Rocket continued to tout its business operations and downplayed the effects of competition on Rocket’s gain on sale margins.
The complaint alleges that throughout the Class Period, the defendants made false and/or misleading statements and/or failed to disclose that: (1) Rocket’s gain on sale margins were contracting at the highest rate in two years as a result of increased competition among mortgage lenders, an unfavorable shift toward the lower margin Partner Network operating segment and compression in the price spread between the primary and secondary mortgage markets; (2) Rocket was engaged in a price war and battle for market share with its primary competitors in the wholesale market, which was further compressing margins in Rocket’s Partner Network operating segment; (3) the adverse trends were accelerating and, as a result, Rocket’s gain on sale margins were on track to plummet at least 140 basis points in the first six months of 2021; (4) as a result of the above, the favorable market conditions that had preceded the Class Period and allowed Rocket to achieve historically high gain on sale margins had vanished as Rocket’s gain on sale margins had returned to levels not seen since the first quarter of 2019; (5) rather than remaining elevated due to surging demand, Rocket’s gain on sale margins had fallen materially below recent historical averages; and (6) as a result of the foregoing, the defendants’ positive statements about Rocket’s business operations and prospects were materially misleading and/or lacked a reasonable basis.
Current Status of Case:
On March 8, 2023, the Court issued an Order granting in part and denying in part Defendant’s Motion to Dismiss. On August 30, 2023, the Lead Plaintiff filed a Motion for Class Certification which is currently being briefed by the parties. This action is ongoing.
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